There is an interesting blog dated August 11, 2015 by an author named Jennie L. Phipps at https://www.bankrate.com/financing/retirement/time-to-fix-social-security-disability/
(last visited August 13, 2015)
The article points out that many people complain about the disability program. There are people who complain it does not do enough. There are people who complain that there should not be a disability program, at least at the federal level. There are people who complain that there are people cheating the system.
But there is some interesting information in the article that people should digest before forming dogmatic opinions on the matter.
The disability program is funded by payroll taxes. Workers currently pay 6.2% of the first $118,500 of their income in payroll taxes. Employers also contribute 6.2% of their employees’ first $118,500 in payroll taxes. Of the 6.2% amount, 5.3% goes towards the retirement portion of Social Security, while the other 0.9% goes to the disability portion of Social Security.
The article advocates fixing Social Security Disability, which is on a trajectory to exhaust its Trust Fund by 2016. The Disability Insurance (DI) Trust Fund is money that has accumulated beyond what is needed to pay its immediate obligations. At that point, the Social Security Disability program will be able to pay what it collects from immediate payroll taxes. This will only pay for 80% of promised benefits to recipients, in other words, recipients will have their benefits cut by 20%.
The average disability beneficiary receives about $1,165 per month. This is only $184 above the federal poverty line for an individual. This means that benefit cuts will place the average disability beneficiary below the federal poverty line.
The average age of disability beneficiaries is 53 years old. The average beneficiary has worked for 22 years before becoming disabled. Because people on disability are very sick, about 20% of them die within five years of the date they start their benefits.
People in their 20’s have about a 25% chance of becoming disabled before they reach their retirement age of 67. The disability insurance program is roughly equivalent to a private insurance policy of $580,000 for a young worker with a spouse, two children and an average income.
The short-term solution to solve the problem of imminent benefit cuts for Social Security recipients is to reallocate funds from the retirement trust fund to the disability trust fund. The retirement program is on a slower trajectory to depleting its trust fund, which at the current rate will be exhausted in 2037. Reallocation has been done many times in the past, as I have blogged about on March 5, 2015. The problem with that is that under current law, in order to do such a reallocation, Congress is required to either enact broader benefit cuts or high taxes to place both programs on a more stable financial footing.
The article highlights a proposed fix advocated by Rebecca Vallas, who is the director of policy for the Poverty-to-Prosperity program at the Center for American Progress think tank.
She proposes enacting broader programs to help disabled individuals get back into the work force. There are already many work incentives built into the disability program. She would expand these to provide assistance for training, placement, transportation, and even bathing and dressing, in order to help disabled people get back into the workforce.
Secondly, she proposes allowing more people to buy into Medicaid. She points out that 42 states have a Medicaid buy-in program that allows working people with disabilities to buy into Medicaid even when their assets and income would otherwise make them ineligible. She admits that this may ending up costing more but it would give disabled people a fair shot at work and a better life.
It is at least food for thought. I am enamored of the idea of helping people improve their lives as much as possible.
In order to be even-handed, I will also blog in the future about free-market solutions that have been proposed by those who advocated moving more towards privatization.
This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.